B&W RESILIENT IN TOUGH TRADING CONDITIONS

The reinstatement of previously delayed contracts and increasing work in Africa saw B&W Instrumentation & Electrical (“B&W”) achieve commendable results for the year to August 2010 in tough trading conditions. B&W is carrying over R433 million worth of secure work into the new financial year, with around R90 million additional annuity income taking the order book to R523 million. One of South Africa’s top three electrical and instrumentation contractors, B&W listed on AltX in 2007.

Revenue grew 19,6% to R601 million. Net profit after tax attributable to ordinary shareholders declined slightly to R57,3 million due to recessionary economic conditions pressuring profitability on contracts. In line with this earnings per share (“EPS”) also dropped to 28,5 cents from 29,6 cents. The marginal reduction in EPS is an achievement taking into account the dilutionary impact of new shares issued for the acquisition of Pontins (Pty) Ltd (“Pontins”) during the year. The acquisition also impacted on operating expenses, kicking them up although the total 45% increase was further attributable to higher overheads to facilitate the growth in revenue.

Chairman John Barrow says the group’s solid financial footing with a positive cash balance and no long-term loans means there was no reason to deviate from the dividend policy – 25% of net profit after tax. B&W accordingly declared a final dividend of 4,5 cents a share.

He points out that while delayed work materialising during the year was a boost to the group’s performance, this came at a cost. “Previous contracts had to be renegotiated when the projects were finally ready to kick off and in the prevailing economic climate we were forced to take a knock on margins to re-secure the work.” Margin squeeze was felt on new work too, although Barrow says not to look a gift horse in the mouth with new work helping to drive growth nicely. “In three months between December 2009 and February 2010 the group brought in new work valued at over R180 million. Our sectors of operation then started to show the first real signs of recovery towards the end of the financial year.”

He adds that the inclusion in the results of Pontins, a lightning and earthing specialist, further added impetus to the group’s performance.

CEO Brian Harley says Africa is a hotspot for B&W, referring to cross-border contracts generating almost half of total group revenue and profit. He points out that this work was substantially responsible for containing the group’s margin fallout, and restricted the overall decline in profit margins to 20% from 21% in the previous year despite the effects of the economic slowdown.

Harley highlights that in addition to returning a satisfactory financial performance, the group achieved some important operational milestones during the year. “We were awarded the Construction Industry Development Board‘s highest accreditation – 9EB – which means we can tender for public sector contracts of unlimited size and value. We also reached a health and safety landmark with one million accident-free working hours at one of our sites.”